(Published December 2024)
You can find more information on our pension tax webpage.
If you’d like in-depth advice, and you can’t find the answer to your query below, you may wish to speak to your financial adviser. If you don’t have an adviser, you can find one at www.unbiased.co.uk.
When is the deadline to pay a lump sum to qualify for this tax year?
If you’d like to pay in a lump sum to be included for the 2024/2025 tax year, you’ll need to complete the Personal contributions form.
So that we can process this before the end of the tax year, please ensure the form arrives to us by Wednesday 2 April 2025. Once we have received your form and completed successful checks, we’ll send you our bank details for you to make your payment.
Payments will need to reach our bank account by Wednesday 2 April 2025 to ensure they’ll be included in the 2024/2025 tax year. Payments received after 2 April 2025 will be accepted and processed subject to successful electronic checks through smart search, but may not be included in this tax year.
How do I set up a direct debit payment to make personal payments?
You can do this by following these simple steps:
- Complete the Personal contributions form.
- Complete the Direct Debit mandate form.
We need the personal contributions form and the Direct Debit mandate form completed and returned before we’re able to carry out our checks. Until we’ve completed our checks, we won’t be able to begin taking payments from you.
You can print, scan and send this to us at personalpayments@peoplespartnership.co.uk. You can also print and send this to us by post at Freepost THE PEOPLES PENSION. It’ll take around 10 working days to arrange your Direct Debit with your bank – we’ll write to you once it’s set up.
For more information about tax relief, and the amount you can save into your pension and receive tax relief on, follow the links below…
What’s the maximum amount I can pay into my pension pot?
You can pay as much as you like into your pension pot but there are limits to how much tax relief you can receive. The value of tax relief received will depend on your individual circumstances.
If you are under 75, you will receive tax relief on contributions up to 100% of your UK taxable earnings. If you have no UK earnings, you can still contribute and receive tax relief on contributions up to £3,600 gross.
You can contribute the equivalent of 100% of your earnings up to a maximum of your annual allowance. For most people the annual allowance for the 2024/25 tax year is £60,000, although you could be subject to a lower amount if:
- you’ve accessed any of your pension savings flexibly and so are subject to the money purchase annual allowance of £10,000
- your adjusted income is over £260,000 a year.
The maximum contribution could be in the form of regular payments, one-off lump sum or a combination of both. The limit includes the contributions paid into all of your pensions (if you have more than one), includes your personal contributions, tax relief and any contributions that are paid by your employer or third party.
You may be able to carry forward unused allowance from previous tax years (see Q&A below).
Can I carry forward unused allowance from previous tax years?
Yes, this is possible. Carry forward allows you to make use of any annual allowance you may not have used during the 3 previous tax years, provided that you have not triggered your money purchase annual allowance and were a member of a registered pension scheme for each tax year you carry forward unused allowance from.
You can use carry forward if you’re an active member currently building up pension savings; a deferred member with paid-up pension benefits; a pensioner member, in receipt of pension benefits from your pension scheme, or a pension credit member, where you have a share of your ex-partner’s pension scheme. Carry forward may be particularly useful if you’re looking to make large pension contributions.
To use carry forward, you must pay in more than the maximum amount you can pay in whilst still receiving tax relief. For most people this will be £60,000 for the current tax year. You can use any unused allowance in the current tax year (£60,000 in 2024/2025) and can then use unused annual allowances from the 3 previous tax years, starting with the tax year 3 years ago.
You can’t receive tax relief on contributions in excess of your earnings in the current tax year and you only receive tax relief over the basic rate to the extent that you’ve paid it.
You can use the pension annual allowance calculator on the government’s website to see how much you can carry forward.
We recommend that you take financial advice before making a carry forward contribution.
How much tax relief do I get on my pension contributions?
Tax relief is available on your pension contiributions up to a standard limit known as the annual allowance, but this is dependent on how much you earn. The annual allowance includes all your pension contributions, tax relief and your employer’s and third party contributions (across all your pension arrangements). The annual allowance for the current tax year is £60,000 – but those who’ve already taken any money out of their pension savings or earn over £260,000 may have a lower annual allowance limit. If you go over your annual allowance limit, you’ll normally have to pay tax on the excess – but in some cases you may be able to carry forward any unused annual allowance from the previous 3 tax years, which may reduce the tax charge.
Under HM Revenue & Customs (HMRC) rules, each tax year you can receive tax relief at your highest marginal rate of tax on 100% on contributions up to 100% of your relevant UK earnings (up to the annual allowance) or £3,600 gross (£2,880 net) – whichever is higher. Relevant UK earnings are usually those earnings which are subject to UK income tax. If you are classed as a Scottish taxpayer, you may pay different tax rates to that of the rest of the UK. For more information, please visit HMRC’s webpage on the income tax in Scotland.
If you’d like more information on tax relief, visit HMRC’s website or take a look at our webpage on pension tax.
How long does it take to get the tax relief from HM Revenue & Customs (HMRC)?
If your employer is using the ‘net pay arrangement’ method where your contributions are taken from your pay before tax, you’ll get your full tax relief straightaway, if you pay income tax. The tax relief is only added to your pot once it has been received from HMRC.
If your employer is using the ‘relief at source’ tax arrangement where your contributions are deducted after tax, we’ll automatically claim tax relief for you, adding the basic tax rate of 20% to your pension contributions. We can receive this payment for tax relief from HMRC up to 12 weeks after your contributions are made into your pension pot.
If you pay more than 20% in tax you will need to claim the extra tax relief directly from HMRC. We cannot comment on how long it may take, though HMRC should be able to guide you.
If you’re unsure whether your contributions are deducted before or after tax, you can find this on your joiner information, or please contact your employer.
If tax relief on my pension contributions for this tax year is received on or after 6 April 2025, which tax year would it apply to?
As it could take up to 12 weeks for HM Revenue & Customs (HMRC) to pay us your tax relief, you may encounter a situation where a tax relief payment for one tax year is received in the next.
For example, tax relief for February and March 2024/2025 tax year may be received on or after 6 April 2025 which would be in the 2025/2026 tax year. So, you’d need to be aware that although this has been received in the new tax year, for HMRC purposes, and for calculating your total contributions for annual allowance purposes, it still applies to the previous tax year 2024/2025.
How can I check what has been paid in?
You can check the pension contributions and any tax relief that has been paid into your pot through your Online Account under the ‘Transactions’ tab. Alternatively, contact us and we can send you a statement in the post.
What are the net pay and relief at source tax relief options?
When your employer set up your workplace pension, they needed to choose from 1 of 2 tax relief methods:
- They may have set it up so that your contributions are deducted from your wages after tax. HM Revenue & Customs (HMRC) refer to this as the ‘relief at source’ method (we call this the net tax basis). When your employer signed up to The People’s Pension, we’d have automatically set them up on the relief at source method and reclaimed basic rate tax relief from HMRC on your behalf. If you pay a higher rate of tax, you need to claim this from HMRC.
- Or they could have set it up, so your contributions are deducted from your wages before tax. HMRC refer to this as the ‘net pay arrangement’ method (we call this the gross tax basis). This means you automatically get full tax relief on your contributions straightaway, regardless of the rate of tax you pay, or whether you live in Scotland or elsewhere in the UK. For ‘net pay’ arrangements, employees who don’t pay income tax will receive a payment directly to their bank account from HMRC each tax year as if they were a taxpayer.
Relief at source is our default tax relief method and an option that not all pension providers offer. So, when your employer set up your workplace pension with The People’s Pension, we’d have automatically set them up on this method, unless they told us otherwise.
Visit our webpage for more about how tax relief works for you.
How do I apply for tax relief?
If your employer is using the ‘net pay arrangement’ method where your contributions are taken from your pay before tax, you’ll get your full tax relief straightaway if you are a tax payer, and you don’t need to do anything.
If your employer is using the tax ‘relief at source’ arrangement where your contributions are deducted after tax, we’ll automatically claim tax relief for you, adding the basic tax rate of 20% to your pension contributions. This is subject to you meeting all the conditions for tax relief to be granted. If you live in Scotland and you pay the Scottish starter rate of income tax at 19%, tax relief granted will be 20% and you won’t have to repay the difference. If you pay more than 20% above the basic rate in tax, then you need to claim back the extra tax relief directly from HM Revenue & Customs (HMRC). See ‘How do I claim tax relief above basic rate on my contributions?’ below or visit HMRC’s website for more details.
For more about tax relief visit our webpage on pension tax.
How do I claim tax relief above basic rate on my contributions?
If your pension contributions have been deducted from your net pay (after tax has been deducted) and you pay more than 20% tax, you can claim your tax back in 2 ways:
- self-assessment tax return
- call or write to HM Revenue & Customs if you don’t fill in a tax return.
If you’re an additional rate taxpayer (ie you earn over £125,140 per year and pay 45% tax on this portion), you can only claim your 25% extra via a self-assessment tax return.
HM Revenue & Customs will normally require higher earners to submit a self-assessment tax return as the only method for claiming their extra tax relief. If you’re unsure about whether you need to submit a self-assessment tax return, please contact HM Revenue & Customs.
If you have any queries on how to claim higher rate tax relief, see the government’s webpage on tax relief.
How do I complete my self-assessment tax return to claim back higher rate tax relief?
If you’re already registered for self-assessment, HM Revenue & Customs will send you a tax return to fill out each year. If you haven’t registered for self-assessment, you’ll need to sign up first via the HMRC website which can take up to 20 working days. You’ll then be sent a letter that contains your unique taxpayer reference, which you use to enrol for the self-assessment online service. HMRC will then send you an activation code by post a few days later so you can sign into your online account and file your return.
You’ll need to ensure you have the following information to hand to complete your self-assessment:
- P60 or P45 form from your employer
- A recent payslip
- Your National Insurance number
- Your pension annual statement (you can view your latest statement in your Online Account)
You then need to complete the box ‘Payments to registered pension schemes where basic rate tax relief will be claimed by your pension provider (called relief at source). Enter the payments and basic rate tax’ where you enter the gross amount (what you’ve paid plus the basic rate relief you’ve already received). You don’t need to include your employers’ contributions and any contributions taken from your pay before it was taxed.
HMRC will tell you how much tax you’ll get back.
I’ve forgotten to claim higher rate tax relief on my pension contributions last tax year – what do I do?
Don’t worry, you can write to your local tax office up to 4 years after the end of the tax year in which you made your contributions and reclaim your extra tax relief.
How do I query the tax I’ve paid on my lump sum payment?
If you have any queries about the tax you’ve paid, or if you think you’ve paid too much tax, you can contact HM Revenue & Customs (HMRC). If you’re due a refund, you’ll need to complete either a P50Z, P53Z or P55 form depending on your personal circumstances. You can contact HMRC on 0300 200 3300 or visit the HMRC website to find the form you need.
What’s emergency tax?
If you’re taking a taxable payment/cash lump sum from your pension pot (and you’re not taking your pot under the small pension pot rules), the first payment will be taxed using an emergency tax code. It ensures that you receive the basic personal allowance and it also assumes you’re entitled to 1/12th of this allowance each month, but doesn’t take into account any other allowances or reliefs you may be entitled to. We’ll keep using the emergency tax code until HM Revenue & Customs (HMRC) tells us (and you) what your correct tax code should be. This means the amount you receive from us may not be the full amount you’re due, and you can reclaim this from HMRC.
We’ll confirm the details of this payment, so you can reclaim any overpaid tax from HMRC.
More about pension tax
If you still have questions, there’s more information on our webpage about pension tax.
Consider getting advice
You may wish to speak to a financial adviser for more in-depth advice about pension tax.